Social Improvement

The foundations of the British social programme were well and firmly laid by the Liberał Governments of 1906 and 1910. This was the work of two radical social reformers, Mr. David Lloyd George and Mr. Winston S. Churchill. A celebrated French historian, writing of the Liberał landslide in 1906, remarked after two years of Liberał legislation one fact at least was established beyond doubt. The election of 1906, on the surface a victory of free trade, and apparently a Nonconformist victory, had been in reality and at bottom a victory of the proletariat.1 The Workmen's Compensation Act, 1897, had awarded compen-sation (against the employer) for the death of a workman, and for his incapacity from accident in certain dangerous trades. Agricul-tural workers were included in 1900; and in 1906, the liability of the employer was extended to bring in "practically every case in which two people stood to each other in the relation of master and ser-vant".2 The first real break with the principles of the old Poor Law was made by the Old Age Pensions Act, 1908. Pensions—modest pensions it is trae, but pensions nevertheless—were offered to persons over seventy without contributions. There was a test of means; but destitution was no longer a necessary condition, nor were the aged reąuired to enter the workhouse in order to ąualify for the pension. The stigma of pauperism was avoided. Labour exchanges were established in 1910; and finally in 1911, schemes of insurance against unemployment and ill-health were organised under authority of the National Insurance Act. The principle of insurance against these risks was not new. It had been introduced in Germany by Bismarck as a part of his social policy in 1883 and 1884.3 Working men had increasingly been coming together during the previous sixty or 1 Halevy: A History of the English People, Benn, London, 1934, Epilogue, Vol. II, Book 1, p. 118. For an account of the men—and the ideas—behind the statesmen, see Beveridge: Power and Influence, Chapters III and IV and pp. 316 and 326. 2 Social Insurance and Allied Services (Beveridge Report), Cmd. 6404, p. 211. 3 Ashley, Annie: The Social Policy of Bismarck (Birmingham Studies in Social Economics and Adjacent Fields), 1912, p. 44, pp. 49-53. Taylor, A. J. P.: Bismarck, Chap. VIII, pp. 204-7. seventy years in such voluntary associations as friendly societies and trades unions, for mutual protection against the cost on the indi-vidual of sickness, death and unemployment. Moreover, a flourish-ing business of industrial assurance was, and still is, undertaken by the Life Offices, providing against death and certain other contin-gencies. The older voluntary associations were not superseded by the Insurance Acts—they were extended and made use of in the new state schemes. What was novel in the Liberał legislation was the principle of compulsion—and the levies on employer and Exchequer. A man before had been free in English law, to join his trade union or friendly society as he chose. Now he had no alternative. Every-body exposed to risk in the designated classes came within the fold of insurance. Weekly contributions, stamped on a card, were exacted from employers and employed. These were supplemented by the Exchequer, and benefit was paid as a right to the insured when un-employed or sick and unable to work. Boards of Guardians, of course, retained their authority under the Poor Law to relieve the sick and the indigent; but only when applicants were destitute, fell out of insurance and had no resource other than the workhouse. Health insurance from the first had covered all manuał workers and non-manual workers earning not more than a certain mini­mum income—£160 in 1911, raised to £250 in 1919 and to £420 in 1942. Unemployment insurance was applied at first only to cer­tain trades, employing about 2 million people, which were thought to be particularly susceptible. These were building and construc-tion, shipbuilding and mechanical engineering, vehicles and certain classes of saw-milling. The scope of unemployment insurance was extended in 1920, becoming practically co-terminous with the health insurance scheme. Farm workers, at first outside insurance, came into the scheme in 1936. The only exceptions were the police, the civil service, railwaymen and domestic servants; trades in which the risk of unemployment was thought to be slight. The insured rose in 1920 to 11,000,000 in the unemployment and 15,000,000 in the health schemes; and 17,000,000, most of whom were already included in one or the other scheme, were brought under the Widows, Orphans and Old Age Contributory Pensions Acts of 1925. The fiscal engine which moved the whole machinę was the pro-gressive taxation of income designed to bring about a redistribution of wealth between rich and poor. The direct taxation of income and property had been used by William Pitt as the means of finding the money to fight Napoleon. Dropped at the end of the French Wars, the income tax was revived by Peel at sevenpence in the pound as a matter of temporary necessity in 1842. Gladstone, to whom the tax was morally repugnant as fiscally objectionable, lamented in 1896 that repeal had been "wholly out of reach" sińce 1874. It was bequeathed to later Chancellors as a driving force of Liberał finance; and to the disgust of the Prime Minister, Sir William Harcourt in 1894 imposed a graduated duty on estates passing at death (the death duties).1 The Liberał Governments of 1906 and 1908 faced an Admiralty engaged in a destructive naval race with Germany, and the rising cost of the new programme of social improvement. Lloyd George, President of the Board of Trade in the one Government, and Chancellor of the Exchequer in the other, introduced a super-tax into his "People's Budget" of 1909. This was levied on all incomes over £5,000, on the excess of in­come over £3,000. Two world wars have sińce added their bur-dens. The rangę of social services, the numbers eligible, and the scalę of benefits have all greatly increased. The progressive principle in Lloyd George's super-tax—the principle, that is, that the rate of tax on each pound should increase with the increase in the tax-payer's income—has sińce been greatly extended. Employers and Exchequer now contribute to the insurance schemes in respect of each eligible person employed; and customs and excise duties at increasing rates have been levied on a steadily widening rangę of commodities. Helped out by the considerable revenues which suc-cessive Chancellors have been able to raise from the common in-dulgences of the people (and more lately by purchase tax and the tax on motor vehicles and petrol), the principles of 1909 have for forty years enabled British public finance to sustain the double burden of defence and of social improvement for which Lloyd George had designed them. The power of taxation as the engine of social progress, great as it has been, appears by now to be loaded to its utmost capacity. A more recent Chancellor, Sir Stafford Cripps, has sińce said that there is not much further possibility of the redistribution of national in­come by way of taxation in this country; for the futurę, we must rely rather upon the creation of more distributable wealth than upon the redistribution of the income that exists.2 The pace of the movement towards social reform, slowed some-what by the years of depression between the wars and checked by the economy campaigns of 1921 and 1931, accelerated when the 1 Halevy: Age of Peel and Cobden, pp. 14-15. Magnus: Gladstone, particularly pp. 151 and 228. 2 463 H.C. 2091. Kaldor: An Expenditure Tax. United Kingdom once more met the menace of total war. The Coali-tion Government of 1941 asked Sir William (now Lord) Beveridge to undertake, with special reference to the schemes, a survey of the existing schemes of social insurance and allied services, including work-men's compensation, and to make recommendations. The Report,1 published in 1942, presented a "Plan for Social Secur­ity". The recommendations rested on three guiding principles: first, that proposals for the futurę, while using in fuli the experience of the past, should not be restricted by sectional interests established in the gaining of that experience; second, that social insurance should be treated as a part only of a comprehensive policy of social progress; and third, that social security must be achieved by co-operation between the State and the individual. The State should offer security [in return] for service and contribution. The State in organising security should not stifle incentive, opportunity, responsibility: in establishing a national minimum, it should leave room and encouragement for voluntary action by each individual to provide more than the minimum for himself and his family.2 The Report recommended the compulsory insurance of all citizens irrespective of income—and not, as in the earlier schemes, only designated classes of employees. The scheme provided for the birth, the old age and the burial of every citizen; it also provided for his protection throughout his working life against interruption and loss of earnings, caused by unemployment, sickness and industrial injury. The cost was to be met by an application of the well-tried method of a weekly contribution from the employer and the employed, with a supplement from the Exchequer. Housewives and mothers were to be eligible for benefit in virtue of their husband's insurance. Special rates of contribution were to be arranged for the self-employed and the unoccupied. Few were expected to fali outside so wide a net; but for the few who did there would be relief, admin-istered on proof of need through the National Assistance Board. The solvency of any scheme of insurance is threatened when an unexpectedly large number of the insured are exposed to and likely to incur the risk; and a plan for social security, though designed as a scheme of social insurance, would certainly degenerate into relief (borne chiefly on direct grants from the Exchequer) should there be continuous interruption of earning—either by ill-health, or by the recurrence of unemployment on the scalę to which the people of the United Kingdom had unhappily become accustomed between the wars. The subjection of any body of the insured to prolonged bouts of unemployment, whether the result of slump and depression or of chronić ill-health, would have to be avoided; and the means would have to be found for reducing the chance that the benefits re-ceived by the unemployed with large families might be greater than their incomes when in work. The Plan for Social Security thus de-pended upon three fundamental assumptions: (a) that a part of the cost of providing for children should be paid to all citizens, whether in work or not (this part was met not by insurance but directly, by allowance from the Exchequer); (b) that comprehensive health and rehabilitation services should be made available to everybody; and (c) that employment be maintained and mass unemployment pre-vented.